ESRB publishes report on macroprudential structural buffers and revised Handbook on Operationalising Macro-prudential Policy in the Banking Sector

27 February 2018

The ESRB has today published its analysis of the use of structural buffers – i.e. the buffer for global systemically important institutions (G-SIIs), the buffer for other systemically important institutions (O-SIIs) and the systemic risk buffer (SRB) – in the European Union (EU) over the last three years. The entry into force of CRD IV and CRR on 1 January 2014 provided Member States with a harmonised set of instruments to address both cyclical and structural systemic risks at national level.

The Flagship Report and the first issue of the ESRB Handbook, both published in 2014, provided initial guidance on the use of these instruments. Since their publication, more practical experience with structural buffers has been gained. All Member States have implemented frameworks for identifying O-SIIs and setting buffer rates, while several Member States have also activated the SRB for different systemic risks.

Based on current experience with structural buffers and on economic analysis, additional guidance for national authorities has been included in the revised ESRB Handbook, namely:

  • guidance on O-SII buffer calibration;
  • a common understanding of the categories of long-term non-cyclical risks that the SRB can address would be useful to ensure its coherent application;
  • clarification of procedural aspects of SRB application;
  • cooperation among authorities;
  • potential use of the leverage ratio to complement structural buffers.

Furthermore, the ESRB has today published an Opinion on how the EU legal framework for structural buffers could be enhanced in order to apply the macroprudential toolkit more effectively. This would strengthen macroprudential policy and protect the Single Market. The main proposals include:

  • a substantial increase in the O-SII cap from 2% to 3% with the possibility for designated authorities to impose buffers higher than 3%, subject to approval from the European Commission;
  • a substantial increase in the additional O-SII buffer cap on subsidiaries: the O-SII buffer for subsidiaries of EU parent institutions should not exceed the fully phased-in O-SII or G-SII buffer applicable to the group at consolidated level by more than 2 percentage points;
  • an upgrade of the SRB to the status of a dedicated instrument targeting structural systemic risk. This would require the possibility of a sectoral application of the instrument and of multiple SRB applications, to allow authorities to address distinct specific risk;
  • delineation of the SRB and O-SII buffer; structural buffers should be additive in so far as they target different systemic risks;
  • simplification and clarification of the processes and improvements in transparency.

These policy considerations should not be understood as formal ESRB warnings or recommendations, as defined by Article 16 of the ESRB Regulation.

For media queries, please contact William Lelieveldt, tel.: +49 69 1344 7316.